Thursday, June 21, 2012
The SEC charged a New Jersey businessman with running a stock-lending scheme that defrauded public company officials and brought restricted stock to the market. The case is the second the SEC has brought this year involving stock lending. In March, the SEC charged two executives and their California-based firm with defrauding corporate officials in an $8 million stock-lending scheme.
Ayuda Equity Funding, LLC and AmeriFund Capital Holdings and owner Manuel M. Bello agreed to settle the SEC’s complaint without admitting or denying the allegations. Bello and the firms jointly agreed to return $3.2 million of allegedly ill-gotten gains, plus interest. Bello also agreed to pay a $500,000 penalty and be permanently barred from the securities industry.
According to the SEC’s complaint, Ayuda and AmeriFund reaped more than $3.2 million of illegal gains on loans to public company officers and directors who put up stock as collateral. Although some borrowers received written and oral assurances that the stock would not be sold as long as they did not default on their loan payments, Ayuda and AmeriFund sold the shares before or soon after making the loans, the SEC alleged.
The SEC also alleged that in at least 35 loan transactions, Ayuda and AmeriFund sold the borrowers’ restricted shares into the market without registering the transactions and the firms and Bello themselves failed to register with the SEC as brokers or dealers.
In a separate administrative proceeding, the SEC charged Howard L. Blum, alleging that he brokered numerous transactions for Ayuda without being registered as a broker or dealer. Blum, without admitting or denying the SEC’s findings, agreed to return more than $1 million of allegedly ill-gotten gains, plus interest, pay a $50,000 penalty, and be suspended from the securities industry for twelve months.